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China Nuclear Delivered

China Nuclear 2017: It's Quiet....Too Quiet...

All things considered, 2017 has been an exceedingly quiet year for the Chinse nuclear industry.  It's already August and we've seen just 1 new reactor entering commercial operation this year:  Yangjiang Unit 4 back in March.  Once Fuqing 4 enters commercial operation as scheduled in Aug/Sept, our grand total for the year will be 2.  In contrast, 7 new reactors came online last year and 5 the year before.

Not only that, but we've seen ZERO new projects pour concrete so far this year. Again in contrast, China nuclear saw 2 FCDs (first concrete dates) in 2016 and 6 FCDs in 2015.

Heading even farther upstream, the total number of new reactors approved by China's State Council this year was also a whopping zero.  

So what's going on? Why has 2017 been such a quiet year for new plant completion, FCDs and approvals alike?

Actually the first half of the answer is pretty straightforward. To construct a CPR-1000 PWR reactor (the workhorse of the current Chinese fleet, comprising 21/36 commercial reactors in China today), Chinese industry needs 5-6 years. Subtract 6 from 2017 and you get 2011 - the year of the Fukushima accident in Japan. Unsurprisingly, there were no FCDs for China in 2011, as a moratorium on new builds was imposed and safety standards were reviewed. Indeed, the only surprising point here is that the China regulator was even able to approve pouring concrete on those 2 new reactors in 2012 just one year later (Yangjiang 4 and Fuqing 4, which will finish this year in a blazingly speedy 5 years).

The second half of the answer is actually pretty straightforward too. China simply can't start constructing any more plants until it finishes the ones its got under construction at the moment.  There are 20 plants under construction at the moment in China.  Here are the numbers:

CPR-1000 --------------------------------------------------------------- 7 units
AP-1000 ----------------------------------------------------------------- 4 units
HPR-1000 (aka Hualong 1) ------------------------------------------- 4 units
EPR ----------------------------------------------------------------------- 2 units
VVER 428M------------------------------------------------------------- 2 units
HTGR --------------------------------------------------------------------- 1 unit

We'll exclude the HTGR for now, as it's a Gen-IV demo plant.

Those 7 CPR-1000s are grandfathered into China's build plan.  The CPR-1000 is a Gen-II design and China has committed to a Gen-III future, so no more CPR-1000s will be built after the last one finishes (Tianwan 6 in 2021).

By all appearances, the VVERs are one-offs for China. Once those last two Russian reactors are completed, it's unlikely we'll see any more of this tech tree in China at Tianwan or anywhere else.

That leaves us with the EPRs, AP-1000s and HPR-1000s, all of which are demonstration projects.   Simply put, these are all Gen III options for China's nuclear build future, but the demo projects aren't finished yet, so we aren't going to see any new FCDs until we get a demonstration plant up.  With EPRs and AP-1000s both suffering from cost overruns and delays around the world, and with both WEC and Areva making their way through their well-documented financial woes, it's not hard to imagine how Chinese policymakers and industry leaders feel, having tied the fate of their highly publicized nuclear objectives to unproven Western technologies.  We witnessed the initiation of China's unsurprising efforts to free itself of overreliance on the Western firms for Gen-III technology back in 2015 when China approved construction of its homegrown Gen-III design, the HPR-1000, which has already begun supplanting former AP-1000 builds in China.

The good news that the end of this long pause is near.  The bad news is that 2017 isn't going to be the year when it all comes to fruition.  At this point in time, all of our sources are pointing to Q1 2018 as the earliest startup date for the AP-1000s and EPRs, if nothing else goes wrong.

This indicates that mid-2018 will be the key time to look out for new FCDs and approvals in China nuclear.  Indeed, we expect a veritable flood of activity to be unleashed by the confirmation that the world's first Gen-III demonstration reactors have been successfully connected to the grid in China (both in China and around the world).  2017 has been slow, for sure, but it's the calm before the storm...the tightening of a bowstring. Very soon, that storm is going to break, that arrow is going to fly, and China nuclear news is going to become a whole lot more interesting.

In our next blog post, we'll be furthering this analysis through a logical follow-up question: Which Chinese reactors are going to pour concrete in 2018? Will they be HPR-1000s, AP-1000s, or EPRs? What about inland plants? Most importantly, what will all this mean for industry stakeholders?  

Has the slowdown in new Chinese nuclear builds affected your business? What are you seeing out there? Let me know in the comments.

 

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